Links. Lessons, the Mobuto-Anglo Irish connection, models and statistics,
- A very dense and very long 2013 speech by Joseph Stiglitz: A Revolution in Monetary Policy: Lessons in the Wake of the Global Financial Crisis. Quote: “Thus, I take strong issue with Bernanke who has tried to suggest that there was nothing wrong with standard macroeconomic and monetary theory; there were only some minor flaws in its implementation.”
- Josh Mason, ‘Only the debt is national‘. The economics and accounting of how the Mobutus of the world and banks like Anglo-Irish succeeded in borrowing abroad, siphoning off the money for private gain and socializing the debt. Quote: “Financial commitments create obligations; when circumstances change, sometimes they can’t be met. Someone isn’t going to get what they were promised. In modern economies, the state (often in the guise of the central bank) steps in to assume or redominate claims, to impose an ex post consistency on the inconsistent contracts signed by private agents. But with foreign-currency commitments to foreigners the authorities’ usual tools aren’t available. And just as important, there are other authorities — the ECB in the case of Greece, the US federal court system in the case of Argentina — that are ready to use their privileged position in the larger payments system to enforce the claims of creditors. In effect, while domestic contracts are always subject to political renegotiation, foreign contracts are — or can be made to seem — objective fact.”
- Conference paper by N. Bokan, A. Gerali, S. Gomes, P. Jacquinot and M. Pisani about the ECB flagship ‘Eagle model'(a so-called neoclassical DSGE model). They added a banking sector to the model of the ECB (and call it ‘Eagle Fli’…). Yes, right, it was only in 2015 a banking sector was added to the flagship model of the European Central Bank… As in this model the government still creates all the money, while in reality the banks create most of the money (and the ECB is even phasing out the 500,– bill) these central bank economists still have some way to go. But at least they gave it a try; the original ECB New Area Wide Model (precursor of the Eagle model) model of the ECB did not even have money in the model…
- The chapter about DSGE models in the 7th edition of Mankiw economics textbook starts with the next William Bragg quote: “The important thing in science is not so much to obtain new facts as to discover new ways of thinking about them“. Wrong. The PhD thesis of Benjamin Hav Mitra Kahn, ‘Redefining the Economy’, clearly shows that students of famous economists which taught us to think in another way about the economy, like Alfred Marshall, went on to redefine economic statistics to find new facts. Keynes was an exception: he himself guided this process. Mitra Kahn does not mention Veblen, his student Wesley Mitchell became head of the NBER, his student Morris Copeland conceived the flow of funds statistics and his student and friend Isador Lublin became head of the Bureau of Labour Statistics. It’s clearly one of the mayor failings of neoclassical macro-economists that they have not been able to spawn a system of statistics consistent with their models.